A planned approach to the fashion business

My first excursion into the world of fashion and designer clothes seemed to be progressing beyond all expectations. The Street Theatre designs were in every magazine, more and more of the multiples wanted to provide concession space for us to trade. There was only one problem though, I didn't have enough money to finance any major expansion. Like all rapidly expanding businesses I ran into the problem of cash flow.

I had a word with my accountant and he brought to my attention a new scheme the Government had just announced that had been set up to help entrepreneurs in my position. It was called the Government Guaranteed Loan Scheme. It was an excellent scheme devised by the Thatcher Government to help business people who needed capital for a business venture but didn't have sufficient collateral to obtain funding from the banks. The idea was that if a bank thought a business venture looked viable the bank could ask the Government to guarantee eighty five percent of any business loans they provided. This greatly reduced the bank's exposure to risk and allowed them to make loans on promising enterprises that they'd normally have to turn down.

I spoke to my bank manager, who was now quite familiar with my somewhat unconventional approach to business and he agreed that my case was the kind of situation the Government Guaranteed Loan Scheme had been intended for. He said he'd certainly recommend that I should be given this facility.

Knowing that the Government Guaranteed Loan was decided solely upon the recommendation of the bank, I went ahead and started to set up retail units and order all the necessary fabrics and arrange for the manufacturing. Then fate took a hand. My bank manager was promoted to head office and in his place came a conscientious new manager who wanted to see my operation.

When I took him around to my workroom, he wasn't at all impressed. All he could see was a bunch of trendy looking people who didn't look as if they'd done a day's work in their life. When I introduced him to Boy George, fully made up with dreadlocks and wearing a ladies dress and high heel shoes, he nearly had a fit. The very next day I had a formal letter from the bank to say my application for a Government Guaranteed Loan had been rejected.

I was then in deep trouble. I was already committed to much of my program so I hurriedly went to a new bank and asked them if they'd consider giving me a Government Guaranteed Loan. I told them what I'd achieved and showed them all my trading figures and although suitably impressed they told me that before they could proceed I'd have to provide a detailed business plan, a cash flow and a profit and loss account.

I consulted my accountant and he suggested that I buy one of the new Apple II computers that were just beginning to arrive in the UK and use a program called "VisiCalc". This VisiCalc program was the first ever spreadsheet and is reputed to have been the program that made Apple Computers the the success it became and established personal computers as a serious business tool.

The VisiCalc spreadsheet was the perfect modelling environment for my business. I set out all the weeks over a two year period, entered in the eighteen retail units I planned to run. I put in values for the weekly overheads. I multiplied these by the necessary numbers to get the required turnover to cover costs and show a profit. From these numbers I could calculate the sales and manufacturing targets.

As I got the hang of using the spreadsheet, I set it up to model various trading scenarios with different sales volumes. I made adjustments for seasonal variations; calculated the manufacturing schedules and the cash flows. I built in various rates of progress, allowed for the possibility of sales falling below expectations, allowed for clearance sales at the end of seasons. Through playing around with the formulae available to the spreadsheet I could simulate all known possibilities and variables and incorporate a variety of appropriate contingency plans.

When I'd finished and presented this plan to the bank manager he told me that it was the best and most thorough proposal for a loan he'd ever seen in his many years experience as a bank manager. He had no hesitation at all in putting me up for a loan.

Unfortunately, my excellent business plan hadn't allowed for the long time it would take to get the application through and the money made available. It hadn't allowed for the fact that my manufacturer would take on other clients while I was waiting for the money. It hadn't allowed for the fact that all the concession units I'd arranged would be re-positioned to the back of the stores when the stock didn't arrive on time. It didn't allow for the fact that when the money arrived and the stock was ready for sale it would be at the end of the season when all garments were on sale.

To say I'd got off to a bad start would be to put it mildly. But it got worse. Although I managed to struggle through and get into the next season with a new range of designs, I'd made the mistake of using a team of conventional designers instead of using customer feedback for design initiatives. This seemed perfectly logical at the time because the sales units I'd opened were scattered all over the country and it was impossible to get information about what was fashionable in every area. But, I figured we were so high profile, with our designs in all the fashion magazines, that we could lead the fashions instead of following them.

Big mistake. What my sophisticated designers thought were very clever and trendy designs looked ridiculous in the eyes of the trendies in the clubs who, at that time, were all switching to the new fashion of punk clothing. The smart looking outfits we were making were being outsold by bits of black rag, strung together with safety pins and zips.

Before I could rectify the position, I was caught out by the catch-22 of the Government Guaranteed Loan scheme. I'd spent around eight months running without a profit. Although I hadn't actually made a trading loss, employment taxes for the staff and the (then) fifteen percent sales tax had mounted up to a total sum, owed to the Government Inland Revenue Departments, of twice as much as I'd borrowed from the bank. Faced with an impossible situation I had no alternative but to wind up the company and go into liquidation. So much for forward planning and carefully thought out designs.

Mapping this situation across to e-business and e-commerce, it isn't hard to spot many parallels: the expensively constructed Web site that ends up without any customers.; the negative cash flows as teams of experts work in vain at re-designs; pre-planning to bring about a solution that is out of date before it is in operation.

The real killer though is the mounting losses through overheads as a team struggles to cope with an ever changing situation. I still cannot believe how I was sucked into a situation where I'd given up a highly flexible, low cost system and replaced it with a ponderous, slow reacting organisation that carried fatal overhead penalties.